This article was published on Dec. 16, 2024, at 4:34 p.m. on the Chosun Biz Money Move (MM) site.
Littco, the only manufacturer of bidirectional fine dust collectors in the country, has entered the mergers and acquisitions (M&A) market. This comes three years after the preliminary restructuring investment by a blind fund jointly created by Yuhamco and IBK Investment & Securities in 2021. During this period, Littco's net loss increased from 11.6 billion won to 17.4 billion won.
On the 16th, according to the investment banking (IB) industry, Littco's sales agency, Samil Accounting Corporation, plans to attract external capital through a third-party allocation of new shares. The seller plans to select a preferred negotiation partner after receiving letters of intent (LOI) until the 27th and conducting due diligence.
The seller is expected to structure the deal by issuing new shares instead of selling existing shareholder equities, as is typical in management rights sales. This is because the proceeds from the sale would go to the shareholders. The new owner is expected to use the proceeds from the sale to repay Littco's debts and initiate corporate normalization.
Founded in 1995, Littco was the first company in the country to develop bidirectional electric dust collectors for reducing fine dust in subway mainline tunnels and ventilation shafts in 2014. Leveraging the know-how accumulated from its tunnel ventilation system business, Littco expanded its focus to the fine dust reduction business for subway ventilation shafts.
Including Yuhamco and IBK Investment & Securities, several financial investors (FI) have invested in Littco, anticipating that the market needing Littco's technology will continue to grow. The Ministry of Environment has been advancing policies to lower the concentration of fine dust in subways, drawing attention to Littco's growth potential.
Currently, Littco's largest shareholder is Yuhamco IBK Financial Group Corporate Financial Stability Private Equity Investment Limited Partnership, holding 42.88% equity. Intervest, a domestic venture capital (VC) firm, holds 15.77%, while private equity fund (PEF) managers Bearstone Partners and Guru Investment Partners hold 12.24% and 10.26%, respectively. Investors are believed to have initially invested in redeemable convertible preferred shares (RCPS) and convertible bonds (CB), then converted to common stocks.
The industry expects active contracts for Littco, which possesses fine dust reduction technology, as major private investment projects (SOC), including the starting construction of the GTX line, are planned. However, the continued deterioration of management performance is considered a downside for this sale process. In 2021, when Yuhamco invested, Littco recorded revenues and net losses of 85.7 billion won and 11.6 billion won, respectively. However, two years later, the company reported a net loss of 17.4 billion won.
An IB industry official noted, "As the government, including the Ministry of Environment, continues to promote fine dust reduction policies, related contracts are expected to increase," but added, "Most of the net losses are interest expenses, so the newly injected funds will likely need to be used to pay down loans." As of July this year, Littco's current liabilities amounted to 58.7 billion won.